I'm hacing the same issue with my iMac at the moment too and we are thinking it's the controller. When we used a firewire cable to do a disk utility we could see the files on the HD but couldn't access them. We replaced the HG when another one I know was fine and we got it to completely reformat and install the OS again via firewire cable, but then it failed again when loading. Our guess is that the HD's are fine and it's the controller itself.